Government Role in Green Procurement

2753 words (11 pages) Business Assignment

15th Jun 2020 Business Assignment Reference this

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Abstract

Green procurement involves considering environmental impacts and costs when purchasing goods and services (“Department of the Environment and Energy”, 2018). It is designed to reduce the negative impact of purchased products and services. It refers to “the impacts on the environment that the product and/or service has over its whole life-cycle, from cradle to grave” (“Sustainable Procurement Tools”, 2019). This includes considerations such as waste disposal and operating and maintenance costs over the life of the goods and services.

Government Role in Green Procurement

As the public is increasingly concerned about the sustainability of economic development, the term “green business” emerged at the end of the 20th century. This is due to the growing awareness of many environmental concerns such as the depletion of natural resources and the decline in environmental quality (Čekanavičius, Bazytė, & Dičmonaitė, 2014). Although the origins of the modern “green movement” can be traced back to the mid-1960s, it took companies nearly 20 years to adapt to the “green” trend and incorporate it into its ideology and practice, thus creating the word “green” (Čekanavičius, Bazytė, & Dičmonaitė, 2014). Still today, green business practices are still far from being universally accepted and applied by companies. One of the reasons for this is that operating green businesses is still considered expensive. Another reason is related to national characteristics in terms of cultural, political and economic differences.

Green procurement has not been universally defined which, “creates one obstacle to implementation, but many businesses have moved forward in demonstrating their commitment and ability to make purchases that reduce their impact on the environment” (“Green Procurement – Pollution…”, 2019). Even today, the essence of the green business concept is still unclear, which can be proved by various definitions found in different sources. Green procurement is a consideration of supply chain management and is also known as environmentally preferred purchasing (EPP), green purchasing, affirmative procurement, eco-procurement, and environmentally responsible purchasing (“Green Procurement – Pollution…”, 2019).

Green procurement involves considering environmental impacts and costs when purchasing goods and services (“Department of the Environment and Energy”, 2018). It is designed to reduce the negative impact of purchased products and services. It refers to “the impacts on the environment that the product and/or service has over its whole life-cycle, from cradle to grave” (“Sustainable Procurement Tools”, 2019). This includes considerations such as waste disposal and operating and maintenance costs over the life of the goods and services.

Most governments have implemented policies that promote the principles of green procurement and are increasingly concerned that businesses actions meet the needs of the present without compromising the needs of the future. They believe that green procurement will be an opportunity to increase the value of the organization by increasing productivity, assessing value and performance, facilitating communication between buyers, suppliers and stakeholders, and encouraging innovation (“Department of the Environment and Energy”, 2018). Green procurement can have the most positive impact on the environment, society and economy throughout the life cycle of goods and services.

The government has also played a role in recognizing the impact of human behavior on the environment and taking action under the pressure of consumers. The government provides a regulatory framework for business operations that aims to limit environmentally harmful behavior and promote environmentally friendly businesses. Behavior (Čekanavičius, Bazytė and Dičmonaitė, 2014). Examples of such legislation and policies include environmental taxes, green public procurement, integrated product policies, eco-labeling, and ecological auditing3. Green public procurement requires companies to meet certain environmental performance standards, such as ISO 14000 certification, to be eligible to work for the government and to work with the government. At the EU level, green procurement practices have been developed for the following products or service groups: construction, transportation, copying and drawing paper, cleaning products and services, office IT equipment, furniture, electricity, food and catering services, textiles and gardening. (Čekanavičius, Bazytė and Dičmonaitė, 2014). Integrated Product Policy is a comprehensive tool that minimizes environmental degradation caused by the use, disposal or manufacture of products. Another example of a government-supervised ecolabelling scheme is the “EU Energy Label”, which all European manufacturers must inform consumers about the energy efficiency of household appliances (Čekanavičius, Bazytė and Dičmonaitė, 2014).

The European Union has made green procurement almost mandatory through various regulations, such as the Waste Electrical and Electronic Equipment Directive, which stipulates that companies must adopt recovery and reuse guidelines as a means of reducing waste (Guenther, Scheibe, & Farkavcová, 2010). Now, the new concept in environmental legislation has evolved from order control rules to prevention. This concept promotes and expands the process of producer responsibility. “In addition to international certification standards such as ISO 14000, competition strategy issues, new market opportunities, process innovations, products and services, etc., also indicate that for the industrial sector, environmental protection can be considered beneficial to the business” (Lemos & Giacomucci, 2002). Several indicators indicate this. One such indicator is green procurement activities at multiple levels and in multiple locations. Guidance on how to incorporate green procurement into public policy is under discussion or has been finalized by governments such as Canada, the United States and the European Union. The Environmental Protection Agency gives another example of the importance of green procurement activities. The US Environmental Protection Agency has launched an EPP program called Environmental Prioritization. EPP aims to incorporate key environmental factors with traditional price and performance considerations into purchasing decisions (Lemos & Giacomucci, 2002). Canada also understands that green procurement by government is an important part of integrating sustainable development into the daily activities of government departments. In this sense, it has developed the “Environment Canada’s Green Procurement Policy’ (Lemos & Giacomucci, 2002).

Going green also has legal and tax advantages. States such as California have reduced their emission allowances, so companies such as FedEx and General Electric have adopted green technology to reduce emissions and comply with state standards. State-level tax credits and incentives are also available. For example, Florida allows companies that produce and sell electricity through renewable energy facilities to receive corporate income tax credits. Florida businesses can also waive business taxes on solar systems, equipment, machinery and other renewable energy technologies. “The Solar System Incentive Program allows Florida companies to receive rebates, and the Renewable Energy and Energy Savings Technology Grant Program provides grants to Florida companies that use solar and renewable energy to run their businesses” (Lorette, 2017). In addition, the US Internal Revenue Service allows companies that use corporate cars, such as hybrid vehicles, to obtain alternative car credit under federal taxes. The federal government also allows companies to obtain up to 30% tax credit on the use of solar and wind energy (Lorette, 2017).

Toyota has become another company in the green procurement industry. Toyota is one of the world’s largest car manufacturing companies. They proposed innovative cars that reduce the overall carbon footprint. One of the most outstanding cars is the Prius, which is also known as the world’s first mass-market hybrid. The car has been sold to more than 38 countries around the world, and even the EPA recognizes its efficiency in fuel consumption (Rinkesh, 2019). “In the UK, it is listed as the third low-carbon car third least carbon-emitting vehicle” (Rinkesh, 2019).

Another company that has converted to becoming a green procurement industry is Ford Motor Company. Although automotive companies are known to be among the the most polluting companies, Ford has changed this by implementing a ten-part environmental policy. “The company’s vehicles use sustainable fabrics, while 80% of Focus and Escape vehicles are recyclable” (Rinkesh, 2019). Ford also focuses on fuel efficiency. One of their main concerns is their the six-speed transmissions, which provides a clean diesel to their heavyduty pickup trucks. In addition, the company’s smoke plant in Michigan is used as fuel. Ford’s plant also uses geothermal cooling systems, while the Crown Victoria Interceptor distributed to the police has flexible fuel capacity that allows it to operate with ethanol or natural gas (Rinkesh, 2019). In addition, Ford has the world’s largest green roof and is the only company to receive the EPA Energy Star Award twice (Rinkesh, 2019).

Also, Wal-Mart has made great strides in positioning itself as a further green courses in their supply chain operations. As one of the world’s largest retailers, the company has developed strict policies to cut off suppliers, whose manufacturing, processing and distribution methods lead to significant carbon emissions, which has shocked many companies and their competitors (Rinkesh , 2019). All of their retail stores use 100% renewable energy and their transportation systems remain fuel efficient.

There has been research conducted in this area that has consistently shown that professional buyers who consider environmentally superior standards in the procurement process have the right to reduce or even eliminate waste and environmental impact and reduce costs (“Green Purchasing and the Supply Chain”, 2018). There have been studies that showed how environmentally prioritized standards improve the organization’s environmental performance early in the procurement process while addressing ethical, social and economic issues.

Many companies have reaped the benefits of green procurement. One benefit is by reducing unnecessary waste, which can reduce the operating costs of the business. Turning off the lights in a vacant office saves energy, saves utility costs, and increases the company’s profits. Another benefit is improved work environments by providing green options within the company such as, green cleaning products can help employees with respiratory diseases and other health-related diseases, because the “chemicals contained in green products involve fewer chemicals and they are related to physical problems”(Lorette, 2017). Green procurement also benefits to the community by reducing adverse environmental and social impacts arising from procurement decisions. It reducing waste going to landfill. Saves water and reducing greenhouse gas emissions, and reducing air and water pollution, and reduces consumption of both natural and processed resources (“Sustainable Procurement Tools”, 2019).

There are also many challenges that comes along with green procurement including the “lack of financial and human resources, limited innovation capability and limited operational knowhow” (Mafini & Muposhi, 2017). Price can be a challenge. There is a misconception that green products are more expensive than conventional products. In some cases, especially if the price reflects development costs, this is true, but usually there are no significant differences. “Green purchasing can allow an organization to offset financial and environmental risk, rather than inheriting it from their suppliers” (“Green Purchasing and the Supply Chain”, 2018). The real problem may be that the product is ordered less or not ordered locally. Sometimes, the upfront purchase price of green products may be higher, but the price will be much lower. For example, “non-toxic alternatives to toxic products will reduce the cost of shipping, storage, handling and disposal” (“Green procurement”, 2010). This will require fewer licenses, staff training will be reduced, and the consequences of the accident will be greatly reduced (“Green procurement”, 2010). Another obstacle to green procurement may be the lack of acceptable alternatives to this product. For example, “in the furniture manufacturing industry a few years ago, water-based finishes were technically difficult to overcome and costly, which hindered the use of water-based finishes as a substitute for solvent-based finishes” (“Green procurement”, 2010). If the quality is low, the growth in demand will stimulate the development of new and better “green” products.

The reason to go green is to “reduce consumption and therefore reduced costs, create customer loyalty and enhanced public image, attract and retain dedicated staff, long-term business benefits, and improved competitive position” (Lemos & Giacomucci, 2002). Companies that portray themselves as being environmentally sensitive tend to create a vision of care. This provides the benefit of perceptions and practicality with the broader effects going beyond the organization. Also, organizations that become environmentally friendly can gain many opportunities and benefits from changing the way they think, and work related to environmental issues. They know that there are too many challenges to overcome. These challenges are factors that continually inspire the innovation process. As a result, the companies are seeking more innovative ways to promote an environmentally friendly environment by integrating green practices into its business functions.

References

  • Department of the Environment and Energy. (n.d.). Retrieved September 20, 2019, from https://www.environment.gov.au/.
  • Green procurement. (2010, January 1). Retrieved September 20, 2019, from https://www.iisd.org/business/tools/bt_green_pro.aspx.
  • Green Procurement – Pollution Prevention Regional Information Center Topic Hub: Background and Overview. (n.d.). Retrieved September 26, 2019, from https://libguides.unomaha.edu/c.php?g=100408&p=651181.
  • Green Purchasing and the Supply Chain. (n.d.). Retrieved September 23, 2019, from https://louisville.edu/purchasing/sustainability/greenpurchasingsupplychain.
  • Guenther, E., Scheibe, L., & Farkavcová, V. G. (2010). “The Hurdles Analysis” as an instrument for improving sustainable stewardship. Management Research Review33(4), 340–356. doi: 10.1108/01409171011030453
  • Lemos, A. D. D. C., & Giacomucci, A. (2002). Green procurement activities: some environmental indicators and practical actions taken by industry and tourism. International Journal of Environment and Sustainable Development1(1), 59. doi: 10.1504/ijesd.2002.000718
  • Lorette, K. (2017, November 21). Why Businesses Should Go Green. Retrieved September 25, 2019, from https://smallbusiness.chron.com/businesses-should-green-766.html.
  • Mafini, C., & Muposhi, A. (2017). The impact of green supply chain management in small to medium enterprises: Cross-sectional evidence. Journal of Transport and Supply Chain Management11. doi: 10.4102/jtscm.v11i0.270
  • Rinkesh. (2019, January 26). 17 Top Companies That are Going Green in 2019. Retrieved from https://www.conserve-energy-future.com/top-companies-that-are-going-green.php.
  • Sustainable Procurement Tools. (n.d.). Retrieved September 26, 2019, from https://www.ungm.org/Shared/KnowledgeCenter/Pages/PT_SUST.
  • Čekanavičius, L., Bazytė, R., & Dičmonaitė, A. (2014). Green Business: Challenges And Practices. Ekonomika93(1), 74–88. doi: 10.15388/ekon.2014.0.3021

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